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Building a more sustainable economy in Europe: non-financial Information and sustainable finance –what next?

Date

26 Jun 2017

Sections

Euro & Finance

Building a more sustainable economy in Europe: non-financial Information and sustainable finance –what next?

EU experts took stock of progress made so far and discussed a way forward for a European strategy for sustainable finance at recent multistakeholder conference jointly organised by ACCA, AVIVA, Barclays and the IIRC in Brussels.

Building on work already undertaken at the international level by the G20 Green Finance Study Group and the Financial Stability Board Task Force, the EU is keen to promote an ambitious approach to sustainable finance. This work is developing significant momentum: the interim report of the high-level expert group created to help define a comprehensive European strategy by the end of 2017 is nearing completion and the European Commission just released its long awaited guidelines on non-financial Information, taking into account the recommendation of the FSB Taskforce on Climate-related Financial Disclosures. A growing number of companies are already using integrated reporting created to enhance accountability, stewardship and trust. However, to properly embed sustainability into EU financial services policy and the Capital Markets Union, an overarching approach is required.

With this in mind, ACCA (the Association of Chartered Certified Accountants), AVIVA, Barclays and the International Integrated Reporting Council (IIRC) organised a lively debate to take stock of progress made so far, and to discuss a way forward for a European strategy for sustainable finance. The debate confirmed that promoting financial stability and sustainable development by enhancing the links between investment decisions, corporate behaviour and reporting has become a global need

Richard Howitt, CEO of the IIRC opened the debate: “The Non Financial Reporting Directive provides an important impetus to 6,000 businesses across Europe to start thinking about their broader value creation. My message to these businesses is that they cannot think of issues such as human rights and climate change as non financial. In the long term these issues will have a very real financial implication for business. I urge them to use this Directive as an opportunity to think about their strategy and business model as a whole, taking into consideration the broad resources and relationships they rely on. This Directive is an important opportunity to advance integrated reporting in businesses throughout Europe”.

Sirpa Pietikäienen, MEP said: “It is not the time to make small improvements so the situation is slightly better. The bar needs to be set high. We cannot lose opportunities – we need to get it right. There needs to be a system change: approximately 30 pieces of legislation need to be reviewed. The systems need to be harmonised and made compulsory for everybody. If comparability is lost, the whole effort will be lost as well. As regards to reporting, it is crucial to have transparency and comparability. Politicians need to take responsibility”.

Raymond Jack, Executive Director at ACCA said: Non-Financial Information - or NFI - reporting underpins the understanding of a company’s long-term economic value and contribution towards a more sustainable world. Traditional professional accountancy skills have proved useful in the development of NFI standards: it has required the gathering and analysis of data, a consideration of materiality, the management of risk, a valuation of assets and liabilities and an understanding of corporate reporting, amongst many other considerations. However, the situation cannot allow us to be complacent. We are facing sustainability issues on a global scale, and while the accountancy profession is already playing an important role in this arena, there is certainly much more to be done.

Steve Waygood, chief responsible investment officer at Aviva Investors stressed: “For finance to be sustainable every intermediary needs to act on the information promoted by integrated reporting. This means investment banks should integrate material Environmental Social and Governance (ESG) issues into their buy and sell recommendations. Credit rating agencies should similarly reflect ESG performance when considering business risks of insolvency. Stock exchanges should promote integrated reporting via listing rules and company guidance. And fund managers should integrate ESG in their investment decisions - including how they vote at company annual meetings. And all this should also be able to be seen and understood by the end client whose money it is too. While all this may sound a long way off, it is being discussed today at the EC Sustainable Finance High Level Expert Group. Hold the 18th July for our mid term report launch event."

Mark Lewis , Managing Director European Equity Research at Barclays concluded: “Sustainable finance is of increasing interest to investors, businesses and governments globally, and events like this continue to mark its transition from a niche interest to a mainstream pursuit. I’m delighted that Barclays continues to develop its role in the Integrated Reporting and Sustainable Finance spaces, as evidenced by its support of events such as this one”.

ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. It offers business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.

ACCA supports its 188,000 members and 480,000 students in 181 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. ACCA works through a network of 95 offices and centres and more than 7,110 Approved Employers worldwide, who provide high standards of employee learning and development. Through its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence.

Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. It believes that accountants bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of global standards. ACCA’s core values are aligned to the needs of employers in all sectors and it ensures that through its range of qualifications, it prepares accountants for business. ACCA seeks to open up the profession to people of all backgrounds and remove artificial barriers, innovating its qualifications and delivery to meet the diverse needs of trainee professionals and their employers. More information is here: www.accaglobal.com

About the IIRC

The International Integrated Reporting Council (IIRC) is a global coalition of regulators, investors, companies, standard setters, the accounting profession and NGOs. The coalition is promoting communication about value creation as the next step in the evolution of corporate reporting. The IIRC’s vision is to align capital allocation and corporate behaviour to wider goals of financial stability and sustainable development through the cycle of integrated reporting and thinking. www.integratedreporting.org

About Aviva

Aviva provides life insurance, general insurance, health insurance and asset management to 33 million customers. Aviva’s asset management business, Aviva Investors, provides asset management services to both Aviva and external clients, and currently manages over £340 billion in assets. Total group assets under management at Aviva group are £450 billion. Aviva helps people save for the future and manage the risks of everyday life. By serving our customers well, we are building a business which is strong and sustainable, which our people are proud to work for, and which makes a positive contribution to society. You can find out more at http://www.aviva.com/media/